What Private Equity Firms Look for in an Investment
Phoenix, Arizona-based real estate and private equity firm Clear Sky Capital Inc. has expertise in acquisitions, renovation, and disposition of assets with an aim of creating value for its investors. Clear Sky Capital Inc. relies on its experience to add value to specific sectors that are growing but lack sufficient capital and operational focus.
Before a private equity firm makes an investment, it must do extensive research including due diligence to determine the viability of an investment opportunity. For starters, private equity firms choose to invest only in market segments that show potential for growth. The objective of an investor is to make good returns and therefore, it makes sense to choose a company that has excellent prospects of growing within its sector.
Companies that have multiple avenues of growth are ideal targets for private equity firms. The firm to be acquired should not only be relying on one revenue driver. There should be avenues for new product creation, branch network expansion, and the potential to increase the current customer base.
Private equity firms prefer investing in companies that have low capital expenditure requirements. This enables management teams to enjoy more flexibility in how capital is distributed to run core business activities. Capital intensive businesses always generate lower valuations due to the higher financial risks.
Firms with stable and recurring cash flows are attractive investments, as private equity firms can use the steady income streams to settle debt requirements. These companies are also relatively shielded from economic fluctuations and commodity price changes.
Before a private equity firm makes an investment, it must do extensive research including due diligence to determine the viability of an investment opportunity. For starters, private equity firms choose to invest only in market segments that show potential for growth. The objective of an investor is to make good returns and therefore, it makes sense to choose a company that has excellent prospects of growing within its sector.
Companies that have multiple avenues of growth are ideal targets for private equity firms. The firm to be acquired should not only be relying on one revenue driver. There should be avenues for new product creation, branch network expansion, and the potential to increase the current customer base.
Private equity firms prefer investing in companies that have low capital expenditure requirements. This enables management teams to enjoy more flexibility in how capital is distributed to run core business activities. Capital intensive businesses always generate lower valuations due to the higher financial risks.
Firms with stable and recurring cash flows are attractive investments, as private equity firms can use the steady income streams to settle debt requirements. These companies are also relatively shielded from economic fluctuations and commodity price changes.
